Network Optimization
For a 3rd Party Logistics Provider serving the
food industry, Harkness Wilder was engaged to identify improvement
opportunities in the distribution system dedicated to its largest
client, a Fortune 100 food manufacturer. The scope of the project
included transportation activities in and out of the distribution
centers, and the physical configuration of the distribution network.
We analyzed freight history, and the shipping and receiving
processes at the DC’s. We identified opportunities to leverage
transportation activities and consolidate the carrier base across
the distribution network for more favorable rates and terms. We also
identified a rampant problem of negative loads where minimum charges
could be re-negotiated. Other opportunities included backhaul
options and continuous moves. These recommendations presented
savings opportunities of approximately $1 million. To assess the
distribution network, Harkness Wilder conducted a network modeling
study to determine the most cost-effective distribution network,
considering production and shipping requirements, and constraints.
Using CAPS technology, Harkness Wilder first constructed a base case
optimization model of product flow through the current network, for
the purposes of comparison. Having identified 112 possible DC
locations, we then chose scenarios of five, six, seven, and eight DC
locations, based on proximity to production, transportation costs,
inventory requirements, customer demand, and warehousing costs.
Based on the model we constructed, we were able to determine an
optimal distribution network, size, and location, that generated
savings of approximately $3.9 million compared to the optimized
existing network.
